Business and economic news for the Santa Barbara region

Beginning of End for Labor Market Crisis?

By Mark Schniepp and Ben WrightMay 14, 2020

The unemployment rate peaked in late April and began to improve in the first week of May.

Is this the beginning of the end for the labor market crisis? Will the re-hiring process accelerate from here? That is still a large unknown, but right now the evidence does suggest that the labor market is better today than it was yesterday.

Continuing claims for unemployment benefits are now declining for both the United States and California. Perhaps the Paycheck Protection Program is working to re-employ workers who were laid off in March and April. The construction industry has also returned to work here in California and a number of counties have been given the OK to “open up.”

The following charts show a range of real-time data that all demonstrate improvement across various corners of the economy. Consumer spending turned upward right after the $1,200 checks began hitting recipient bank accounts. Weekly hours worked at small businesses bottomed at virtually the same time.

Homebuyers are applying for more mortgage loans and more sellers are putting their properties on the market. Restaurant bookings are up and foot traffic is returning to retail stores. Hotel occupancy rates are improving and air traffic is rebounding ever so slightly.

At this point, evidence of a business cycle turning point is becoming more convincing. There is still great uncertainty about the dynamics of the recovery, and there is concern that the rebound will be meager and/or short lived if virus infections begin to turn up again or business failures intensify. But it’s now clear that the recovery has started because a myriad of indicators has begun to turn positive.

Mark Schniepp is head of the Goleta-based California Economic Forecast, an economic consulting firm that produces commentary and analysis on the U.S. and California economies. The firm specializes in economic forecasts and economic impact studies, and is available to make timely, compelling, informative and entertaining economic presentations to large or small groups.